New Delhi, Nov 16 (PTI) Canara Bank has classified accounts of Reliance Communications and its subsidiary Reliance Telecom as "fraud", according to a BSE filing by the company.
RCom, which is under corporate insolvency resolution process, said that the classification by Canara Bank is not expected to have any impact on the company.
"This is to inform you that company and its subsidiary Reliance Telecom Limited has received letters from Canara Bank, with subject 'Classifying the Account as Fraud', classifying accounts of company and its subsidiary, Reliance Telecom Limited as 'fraud'," the filing by RCom said.
Legal advice is being sought on the way forward with respect to the development, it added.
"The Company is undergoing corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code, 2016. A resolution plan has been approved by the committee of creditors of the company in accordance with the Code and is presently awaiting approval of the National Company Law Tribunal, Mumbai Bench," it said.
The Reliance Communications filing noted that credit facilities/loans referred to in the letter from Canara Bank pertain to the period prior to the CIRP and are required to be necessarily resolved as a part of a resolution plan or in liquidation as the case may be.
"Further, during the CIRP, the company is inter alia protected from, the institution/ continuation of any suits/ proceedings against the company, including the execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority in light of Section 14(1)(a) of the Code," it said.
The filing went on to say that "... it may be noted that by virtue of the protection made available under Section 32A of the Code, upon the approval of the resolution plan in respect of the Company by the NCLT, the Company shall be deemed to have immunity against any liability for any purported offences committed by the Company prior to the commencement of the CIRP (including any liability which may arise as a result of any unlawful transactions identified in the forensic audit report."
The filing also attached the letter of Canara Bank which cited various reasons for classifying the account as fraud. This included "non-utilising (of) the funds as per sanctioned terms, routing the loan amount through Reliance Communication and Reliance Telecom to pay all other liabilities to connected/related parties".
Other reasons highlighted included "intercompany transactions" as well as investing loans availed into Mutual Funds and Fixed Asserts "and the same were liquidated immediately to make payment to related and non related parties".
"On analysing the matter in its entirety, the Competent Authority (Managing Director and CEO) has permitted the matter as `Fraud' as on September 6, 2024 pursuant to which the account has been reported to Reserve Bank of India as fraud on September 18, 2024 by our bank," the letter by Canara Bank said.